Supreme Court affirms health care subsidies

In a 6 to 3 decision that validates federal tax subsidies provided under the Affordable Care Act, the U.S. Supreme Court has ruled the law’s wording allows the federal government to subsidize medical insurance coverage in every state, not just states that set up their own health insurance markets.

The Court’s ruling in favor of broader subsidies in King v. Burwell directly impacts people in low- to middle-income households who can use subsidies to buy medical insurance coverage if they can’t get it through an employer. The decision effectively continues coverage for an estimated 6.4 million people in 34 states, and prevents the health insurers from having to recalibrate their market projections in those states.

Striking down the subsidies could have strongly impacted the medical insurance market. At this point in the calendar year, insurers normally are close to finalizing the health plans, and the associated premiums, they plan offer to employers for the next plan year. With the subsidies having survived a serious court challenge, going back to the drawing board will be unnecessary.

“Very surprised,” says a relieved John Healy, partner and senior account executive with M3 Insurance in Madison. “This is the second challenge to the law, and we all know now that it’s here to stay.”

According to a study by the Kaiser Family Foundation, a ruling against the subsidies would have resulted in premiums increases in the 34 states currently receiving federal Obamacare subsidies, ranging from 132% in Alaska to as high as 650% in Mississippi. In Wisconsin, the Foundation anticipated an increase of 252%.

An analysis from the U.S. Department of Health and Human Services estimated that without the subsidies, premiums would jump 256% for 2015 and even higher in 2016, putting the cost of medical insurance out of reach for many consumers, including small-business owners and self-employed people who purchase insurance directly through the individual market.

President Obama signed the ACA, also known as Obamacare, into law in 2010. At issue in King vs. Burwell was the provision that offers subsidies only to people who buy plans through an exchange “established by the state.” Critics contend those who bought a plan through the federal exchange rather than states were therefore not eligible for the subsidy, while proponents argued the term “state” meant either level of government, state or federal.